Choose from these words to fill the blanks below:

Keynes, stop, Morgan, commodity, prevent, support, society, intervened, failures, gold, Victorian, magnates, recessions, European, prescient, unstable, lender, copper, one, 1914, interdependence, rapid, 1907, cascade, trust, macroeconomics, Reserve, dollar

•

the late 19th century saw increasing troubles in the core                 European nations, and in the United States

•

the economy of the                   Victorian boom began to falter

•

1873-1896 global and near-global                     recessions

•

had the capacity to skip from society to               society

•

the weaknesses of the model of                               interdependence began to show

•

interdependence affected the ability of governments to         stop the problems from spreading

•

this was not new but became more           rapid at the end of the 19th century

•

John Maynard             Keynes (1883-1946)

•

British economist whose ideas fundamentally changed the theory and practice of                             macroeconomics and the economic policies of governments

•

August         1914, wrote essay in Economic Journal

•

worried about the world's ability to survive a major crisis, a                   prescient article

•

the world economy faced two kinds of problems:

•

1. the         gold standard that had served as a ballast for the system, restricted the ability of governments to deal with currency pressures, was very rigid

•

2. private banks were so large in proportion to the amount of money in circulation, that a run on any bank could               cascade into a full-blown financial crisis

•

if       one bank failed, it could bring down the entire system

•

The Panic of         1907

•

a United States financial crisis that took place over a three-week period starting in mid-October, when the New York Stock Exchange fell almost 50% from its peak the previous year

•

panic occurred, as this was during a time of economic recession, and there were numerous runs on banks and           trust companies

•

began with a few bond                 failures

•

collapse in                   commodity prices

•

started with the price of             copper that was being traded internationally

•

the United Copper Company tried to corner the copper market

•

the loans that the banks issued to the company failed

•

then the banks became                 unstable

•

led to a run on stocks

•

pressure on the American             dollar

•

led to the failure of the Knickerbocker Trust Company—New York City's third-largest trust

•

there was no central authority to intervene to put an end to the panic

•

it fell to the                 magnates of Wall Street to solve it

•

J. P.             Morgan (1837–1913)

•

the panic might have deepened if he hadn't                     intervened

•

pledged large sums of his own money, and convinced other New York bankers to do the same, to shore up the banking system

•

put together a major infusion of liquidity, became a "            lender of last resort"

•

pumped in 23 million dollars in the New York stock exchange

•

bought up New York City bonds

•

led to a series of discussions on ways to               prevent these kinds of financial panic situations in the future

•

1913 the approval of the Federal               Reserve Act

•

considered if free markets needed               support to prevent them from ruining their own fortunes